Texas State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Texas, with full citations and the original source on every page.
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When a multinational company routes goods through a chain of intercompany sales inside a Texas bonded warehouse before a U.S. customer imports them, are those in-bond sales taxable, and does merely taking title to the goods there create Texas nexus for the out-of-state entities involved?
Split ruling. Texas held that the chain of sales occurring while goods sit in a Texas bonded warehouse are exempt from sales and use tax under the constitutional Imports and Exports Clause, because th…
Does Texas use tax apply to mobile lodging camp buildings brought in from Canada and set up on leased land to house oil and gas workers?
Yes, use tax applies. Mobile lodging, dining, and recreational modular buildings brought from Canada and set up on leased Texas land to house oil and gas workers remain taxable tangible personal prope…
Does Texas use tax apply to payments a company makes on an aircraft that will be delivered outside Texas and used predominantly out of state during its first year?
No use tax is due. Texas use tax does not apply to a company's payments on an aircraft — structured as a lease that converts into a purchase — because the aircraft will be delivered outside Texas and …
Does an out-of-state video-game company create Texas sales-tax and franchise-tax nexus by sending employees to plan and host a one-time esports tournament in Texas?
Yes. An out-of-state gaming company and its subsidiaries created Texas nexus for both sales/use tax and franchise tax the moment their employees first entered Texas for pre-event planning visits ahead…
When a marketing company buys equipment on a client's behalf as the client's purchasing agent, can it charge the client sales tax on that equipment if the out-of-state supplier didn't collect tax?
No. When a marketing company acts as its client's purchasing agent to buy equipment from an out-of-state supplier that didn't collect Texas tax, the agent — not the client — must accrue and remit use …
Does an out-of-state clothing-subscription retailer owe Texas sales tax on shipments where customers get a 7-day try-on period before being charged?
Yes. An out-of-state online clothing-subscription retailer has a Texas sales and use tax collection obligation, because it retains ownership rights over the clothing — the right to charge for it — whi…
When a company that bought an aircraft tax-free for leasing dissolves and distributes the aircraft to its parent for no payment, does Texas sales or use tax become due?
No tax is due. The Comptroller ruled that an LLC's original tax-free resale purchase of an aircraft stays intact because the aircraft was leased out (under third-party operational control) more than 5…
If a company buys an aircraft tax-free for resale and leases it to its own parent company, does replacing that lease with a lower-payment lease -- or the company later using the plane itself -- undo the resale exemption?
The resale exemption survives all three scenarios. In this companion ruling to 201801014L (same structure, an aircraft purchased about three months earlier), the Comptroller again held the resale exem…
If a company buys an aircraft tax-free for resale and leases it to its own parent company, does replacing that lease with a lower-payment lease -- or the company later using the plane itself -- undo the resale exemption?
The resale exemption survives all three scenarios. The Comptroller ruled that the aircraft purchase qualifies as an exempt sale for resale even though the lessee wholly owns the purchasing company; re…
Does building a manufacturing plant inside a federal Foreign Trade Zone let a company defer Texas sales and use tax on the equipment and materials it imports to build it?
No deferral. The Comptroller ruled that a company building a manufacturing plant inside a federal Foreign Trade Zone (FTZ) still owes Texas use tax on the equipment, machinery, and other goods it impo…
If a customer redirects a software delivery into Texas for installation, is Texas sales tax due even though the customer's employees only ever use the software remotely from outside Texas?
Yes, tax is due. Where software (treated as tangible personal property) is physically delivered and installed controls Texas sales/use tax -- not where the customer's employees are physically located …
In a two-step resale chain (seller to out-of-state Company A to a Texas Company B), who is responsible for Texas sales/use tax if Company A isn't itself "engaged in business" in Texas?
The original seller's sale is exempt as a sale for resale -- Company A (the out-of-state reseller) can issue a Texas resale certificate, validated with its own state's (South Carolina) retail registra…
If most members join a collectibles club mainly for the intangible right to buy exclusive pieces later, is the membership fee still taxable because a low-value welcome kit and newsletter come with it?
Taxable, rejecting a "true object" argument. The company argued that surveys showed new members primarily wanted the intangible benefit of exclusive club status and future purchase rights, not the low…
When a single medical device kit bundles a tax-exempt prosthetic component with non-exempt equipment (needles, guide wires, sheaths), is the whole kit taxable or exempt?
It depends on cost, not just contents. When a single-charge kit bundles an exempt item with taxable items, the predominant cost determines the whole kit's taxability: if the taxable items cost more th…
Does a massage therapist who provides lymphatic compressive therapy need a sales tax permit to buy the bandages used in the treatment, and are those bandages tax-exempt?
No exemption, and no resale certificate. Bandages a massage therapist buys and applies while performing lymphatic compressive therapy are taxable purchases — the therapist is the end user/consumer of …
Is oilfield 'swabbing' — running cable and rubber cups down a well to remove hydrostatic water and start/restart production — a taxable service in Texas?
It depends on the specific downhole task. Swabbing done to start or restart a well — running cable with rubber cups to remove hydrostatic water, even with incidental sand or paraffin — is a nontaxable…
Is electricity used to treat wastewater from a residential community exempt from Texas sales tax, and does it matter whether a third-party treatment company or the landlord itself buys the electricity?
It depends on who buys the electricity. Treating wastewater is a nontaxable service, so the manufacturing exemption under Tax Code § 151.318 doesn't apply to the electricity used to power that treatme…
Which manufacturing-adjacent equipment qualifies for Texas's manufacturing sales tax exemption — hand tools, quality-control gauges, mold-design equipment — and which doesn't?
Mostly no exemption. Disposable epoxy applicator bottles and hand-operated calipers (digital or not) are hand tools and do NOT qualify for the manufacturing exemption, regardless of whether the readou…
Is electricity an agricultural cooperative uses to process its members' farm products exempt from Texas sales tax under the agricultural exemption, or some other exemption?
Exempt, but for a different reason than the cooperative may have assumed. The agricultural exemptions in Tax Code §§ 151.316(a)(7)-(8) and 151.317(a)(5) are limited to farms/ranches and to an 'origina…
What are the requirements for a predominant use study that lets a print shop claim the manufacturing exemption on its natural gas and electricity?
A print shop's electricity/gas can be exempt under the manufacturing exemption if it powers equipment directly used and necessary/essential to manufacturing (§ 151.318(a)(2)), equipment that powers/su…
Is labor to restore residential real property damaged by fire, flood, or explosion tax-exempt in Texas, and how has that answer changed over time (pre-1988, 1988-1993, and after October 1993)?
It depends entirely on the timing and the type of disaster declaration. Before the Legislature added Tax Code Section 151.350 (effective October 1, 1993), labor to repair or restore real and personal …
Is a restaurant's scale/dispenser that portions out a fixed weight of uncooked french fries before frying exempt from Texas sales tax as manufacturing equipment?
Taxable, but only since a rule change. A restaurant scale/dispenser that measures out a fixed weight (e.g., one or one-and-a-half pounds) of uncooked french fries into a frying basket was EXEMPT befor…
Is a calligrapher's labor charge to address wedding envelopes and fill in marriage certificates -- using materials the customer provides -- subject to Texas sales tax?
Yes. A calligrapher's labor charge to address wedding invitation envelopes or fill in names on marriage certificates is subject to Texas sales and use tax, even when the customer supplies the item bei…
When exempt nutritional supplements are packaged and sold together with taxable business tools for a single charge, how is the bundle taxed?
It depends on which item is the package's 'essential character.' If the taxable business tools are the PRIMARY component of a package sold for one price, the ENTIRE sales price is taxable. If the exem…
Is natural gas sold for residential use subject to a special purpose district's local sales tax, even though the utility had been advised to collect it?
No. Natural gas consumed for residential use is exempt from ALL layers of Texas sales and use tax on the transaction -- state, county, metropolitan transit authority/city transit department (MTA/CTD),…
Is nitrous oxide and other medical gas sold to a dentist exempt from Texas sales tax the same way it is when sold to a hospital?
Yes. Nitrous oxide and other medical gases sold to a dentist qualify for the same sales tax exemption as sales to a hospital, because the Comptroller treats dentists as licensed practitioners of the h…
Under Texas's deregulated electric utility market, which separately stated charges on a retail customer's electric bill (transition, nuclear decommissioning, system benefit fund, competition transition, transmission/distribution) are subject to sales tax?
It depends on the specific charge. Transition charges, nuclear decommissioning charges, and system benefit fund fee charges are NOT taxable when separately stated on a retail electric customer's bill.…
Are charges for recruiting and placing foreign-educated nurses with hospitals -- including visa processing, document handling, medical exams, and travel arrangements -- subject to Texas sales tax?
No. Charges for providing recruitment and placement services of foreign-educated nurses to hospitals -- including advertising, recruiting, pre-selecting, processing/documenting applicants, handling vi…
Are the mileage, labor, and parts charges to repair a freestanding farm platform scale used to weigh grain exempt from Texas sales tax the same way the scale itself is?
Yes, as of this 2001 ruling: a freestanding above-ground platform scale used exclusively to weigh grain before storage on a farm qualifies for the agricultural exemption as tangible personal property,…
Can a meat processing plant buy aprons/frocks, refuse receptacles, and liquid soap/disinfectants tax-free under the public-health-compliance manufacturing exemption?
Mixed result across three items. LIQUID SOAP AND DISINFECTANTS for hand/equipment cleaning ARE exempt under Section 151.318(a)(10), because 9 C.F.R. Section 307.2(f) affirmatively requires them for sa…
Does incinerating waste into ash for disposal count as tax-exempt 'processing' or 'manufacturing' of tangible personal property, or is it a nontaxable waste-disposal service instead?
Not processing/manufacturing, as structured in this case. A limited partnership that incinerates waste into ash, where the operation's purpose is waste disposal (not creating a marketable product) and…
Does a company owe Texas use tax on a barge and tugboat it uses to haul waste from Louisiana to Texas, if it doesn't own both vessels?
A follow-up letter correcting an earlier ruling's assumed facts: because the third party actually owns the barge (rather than leasing it) and merely contracts for a manned tugboat from another company…
Does Texas's use tax exemption for repair and replacement parts on licensed self-propelled carriers extend to pipeline components purchased out of state and installed in Texas?
No. Texas Tax Code § 151.330(i) exempts, from use tax, out-of-state repair/replacement parts affixed in Texas only to a self-propelled licensed and certificated carrier (like an aircraft, ship, or mot…
A Texas resident ordered software from an out-of-state (Colorado) company that charged sales tax but is no longer permitted to collect Texas sales tax. Does the buyer still owe Texas tax on the software, and if so, to which state — Texas or Colorado?
Texas use tax is owed. Texas sales or use tax is due on software delivered to a customer for use in Texas, regardless of where the seller is located. Here, the seller was no longer permitted (as of 12…
A Texas manufacturer takes items out of its tax-free resale inventory, ships them out of state for use (no Texas tax due at that point), and later brings them back into Texas. Does it owe use tax if the items come back after more than a year, and does it matter whether the items go back into inventory for sale versus get used?
It depends on what happens to the item when it comes back, not how much time has passed. Rule 3.346(c)(5)'s one-year rule applies only to items purchased OUTSIDE Texas and brought in. For items made o…
When a Texas-permitted seller (Company A) drop-ships an item to a Texas customer (Company C) on behalf of a reseller (Company B), who is responsible for collecting the Texas use tax?
Texas use tax is owed on the sale, but the drop-shipping seller (Company A) doesn't have to collect it as long as it gets a properly completed Texas resale certificate from the reseller (Company B). W…
A CPA asked about three new clients: a coin-operated apartment laundry business, an advertising/marketing firm, and an internet-based construction-tracking software company — what's taxable for each?
Coin-operated laundry revenue itself isn't taxed, but the business owes Texas use tax on the washers/dryers it buys (and must collect sales tax on any vending-machine soap sales). An advertising scrip…
If a Texas repair/calibration company sends its own inspection equipment out of state for repair, does it still owe Texas use tax when the equipment comes back?
Yes. A repairman must pay tax on its own machinery and equipment used to perform repair services, and repair services performed on that equipment are also taxable. If the equipment is sent out of stat…
A nonprofit college runs a federally mandated proficiency testing program for pathology laboratories, charging labs a single subscription fee that bundles the testing service with disposable test-specimen materials the college buys and ships in. Is the college's subscription fee a taxable sale of the specimen materials, or a nontaxable service charge -- and does the college owe Texas use tax on specimens it ships into Texas from out of state?
The subscription fee itself is not taxable: the 'true object' of the program is the testing/accreditation service, not a sale of the specimen materials, so the college (not the labs) is treated as the…
For a Texas-based interstate trucking company, does it matter whether repair parts are bought in-state or out-of-state, and whether they go on the tractor (truck) versus the trailer?
Yes, both distinctions matter. Repair/replacement parts (including tires and tubes) bought OUTSIDE Texas and affixed in Texas to the self-propelled vehicle (the tractor/truck) of a licensed, certifica…
If a company leases manufacturing equipment to a lessee who later incorporates it into a building (realty), does that later incorporation destroy the lessor's resale certificate, and when exactly does an operating lease's 'sale' happen for tax-reporting purposes?
No, incorporation into realty by the lessee does not destroy the lessor's resale certificate or trigger a 'divergent use' problem, because the equipment is still being used as claimed on the exemption…
Can a pilot renting an aircraft to accumulate flight hours toward an Airline Transport Pilot (ATP) rating claim Texas's flight-training aircraft tax exemption, and what proof does the exemption require?
Yes. Tax Code Section 151.328(a)(2)(B) exempts both lessor and lessee from sales/use tax on aircraft use when the renting pilot is using the aircraft in a way designed to lead to an FAA pilot certific…
A teacher wants to order rockets from an out-of-state company for a class project. Is it better for each student to order and pay individually, or for the school to place one order and collect money from students as "donations"?
Have the school place the order. If students order directly from the out-of-state company themselves, Texas use tax is still due — there's no exemption for kids buying school supplies. But if students…
I run a paintball field. Do I charge sales tax on field-use fees? Do I owe use tax on data processing done by an out-of-state company? And do I have to list shipping charges separately from the item price?
Yes to all three, with one nuance. A fee to use the paintball field is a taxable amusement service (though a genuine tournament/contest entry fee can be exempt). Yes, you owe Texas use tax on an out-o…
An out-of-state Internet retailer plans to fulfill orders by drop-shipping from a related Texas limited partnership's warehouses, and will also pay commissions to unrelated Texas retail stores that host invisible order links on their websites. Does any of this create Texas sales/use tax nexus for the out-of-state retailer?
Yes. The Texas limited partnership doing the drop-shipping doesn't itself create nexus for the out-of-state retailer (it can just take a resale certificate). But paying commissions to Texas retail sto…
When a Texas company buys software hosted on an out-of-state server, with modification services performed partly in Texas and partly out of state, how is the license price and modification labor taxed based on where the licenses are used?
A layered answer that splits by delivery point, license location, and where labor happens. A Texas company (Company A) plans to buy software from an out-of-state vendor, installed on the vendor's serv…
For a company with both Texas and California offices sharing software licenses across state lines (via servers in either state, or a single floating license), how is each scenario taxed by Texas?
Three separate scenarios, each turning on where the software was purchased and where it's actually used. SITUATION 1 (software delivered to and purchased in Texas, later a California license added): t…
If a Texas printer stores finished brochures/catalogs in its own warehouse before shipping them to the client's out-of-state customers, is the printing taxable?
Yes, taxable -- storing the printed materials in Texas after printing, even before they're ultimately shipped out of state, counts as a taxable use in Texas by the printer's customer. A printing compa…
A permitted retailer is selling a used tug it had been using for its own hauling (not income-producing) to a company that plans to claim a ship/vessel sales tax exemption. Is the sale of the tug itself exempt?
No. The occasional-sale exemption (Tax Code Section 151.304, Rule 3.316) doesn't apply because the seller is a permitted retailer. And the ships-and-ship-equipment exemption for vessels in foreign or …
A company bought a tetrafluoroethane reclaimer machine to recapture refrigerant from truck air conditioners during repairs, instead of letting it vent into the atmosphere. Is the machine exempt from Texas sales and use tax because it protects the environment?
No. The purchase of the tetrafluoroethane reclaimer machine is subject to Texas sales tax. The Tax Code contains no exemption for equipment purchased to repair air conditioning systems, even though th…
A distributor of trade show display booths sells, rents, ships, sets up, breaks down, and stores booths that travel to trade shows around the country. Depending on where a booth is first delivered/set up (Texas or out of state) and where it's later stored, which charges are taxable?
It all depends on where the booth FIRST goes after the sale. If the customer takes delivery out of state first, the initial sale and related charges are untaxed (though the customer owes Texas use tax…
Are checks that a bank or credit union sells to its customers subject to Texas sales tax, and who has to collect it?
Yes -- checks are taxable tangible personal property under Sec. 151.010, so the sale of checks delivered to a purchaser in Texas is taxable. Who must collect and report the tax depends on how the bank…
My direct payment permit is being canceled because the Comptroller says I didn't buy $800,000 of taxable items this year, even though I did — I just didn't accrue that much use tax on it. Will my permit be canceled?
No, the permit will not be canceled. The Comptroller had initially notified the company that its direct payment permit would be canceled because it appeared not to meet the $800,000 annual taxable-pur…
I run a computer backup service and also install software and do on-site hard disk maintenance for small businesses -- which of my fees are subject to Texas sales/use tax, and at what local rate?
All of it is taxable. The monthly service fee for data storage/backup, the software installation charges, the on-site maintenance fee, and the file-restoration fee are all subject to Texas sales and u…
I bottle and resell water in returnable bottles that I get back from customers and refill -- can I buy those bottles tax-free as packaging/manufacturing supplies?
No -- the purchase is taxable. The Comptroller ruled that returnable water bottles do not qualify for the packaging-supplies exemption. Rule 3.314(b)(1) exempts items like boxes and pallets, but (b)(3…
I'm a cotton ginner and I use gas and electricity to keep my warehouse or storage area cool and dry so cotton seed doesn't sprout, including during the off-season -- is that electricity exempt from Texas sales/use tax?
Mixed answer, split by predominant use. The electricity used to actively lower the temperature or humidity of stored cotton seed to a target level counts as exempt processing. But electricity used jus…
Is the wastewater treatment system my manufacturing company must install to meet TNRCC environmental requirements exempt from Texas sales and use tax?
Partially exempt. The pollution control equipment itself qualifies for the Texas manufacturing exemption because it's necessary and essential to the manufacturer's production process, and the company …
Can a buyer reduce the sales or use tax it already paid on equipment purchases when the vendor later gives back a cash or credit rebate or discount tied to those specific purchases?
Yes, in most of the scenarios described. The Comptroller ruled that volume discounts and cash rebates paid directly by a vendor to a purchaser -- including cooperative marketing funding, consigned-uni…
Does Texas use tax apply to repair or replacement parts (such as retreaded tires) bought out of state and installed in Texas on a common carrier's self-propelled vehicle?
No, use tax is not due on repair or replacement parts acquired outside Texas and actually affixed in Texas to a self-propelled vehicle used as a licensed and certificated common carrier -- but the car…
Can the Comptroller exempt interstate trucking companies from sales and use tax on repair parts and tires, or let them apportion the tax based on Texas miles versus total miles?
No blanket exemption and no mileage-based apportionment. The Comptroller explained it cannot rule on whether the sales tax on repair parts and tires is unconstitutional as applied to interstate trucki…
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These are official tax letter rulings and advisory opinions issued by Texas's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.